ABG Shipyard wins Rs. 10,000-million orders

Surat: Repeat orders of over Rs 1,000 crore bagged by ABG Shipyard from international clients not only enhance the earnings visibility for the company but also reaffirm its execution capabilities.

The new projects would take the company’s order book position to Rs 8,277 crore – about 12 times the company’s revenues for FY07.

Further, the orders include five 54,000 Dead weight tonnage (DWT) bulk carrier vessels. ABG Shipyard has 12 such orders for a limited number of customers.

Similar specification for small bulk carrier vessels (32,000-54,000 DWT) is likely to result in economies of scale thereby strengthening profit margins. ABG Shipyard has already shown signs of improving its profit margins in the preceding quarter.

Capacity expansion

The company’s acceptance of a steady stream of orders is backed by its strategic moves to enhance capacity. The completion of its Surat facility expansion, expected commissioning of new facility in Dahej by April 2008 and the acquisition of Vipul Shipyard are all expected to bolster the company’s ability to execute orders.

The company also appears well geared to fund its scaling up of capacities and revenues. While the company’s board has recently cleared the issue of equity shares to qualified institutional buyers, it has also started receiving cash from the Government under the promised shipbuilding subsidy. An expected continuation of the scheme (albeit at lower rates) and quick receipt of the subsidy money from the Government will could help the company meet short-term working capital requirements.